California Franchise Laws
How to Find State Specific Franchise Laws for California
A franchise is a type of business that is based on the use of a successful company's trade name in exchange for a fee. In addition to the Federal Trade Commission's laws governing the sale of a franchise, California has its own strict pre-sale disclosure laws. You can find detailed explanations of California's state specific franchise laws using a variety of resources.
1. Visit the California Department of Corporations website to review and download the list of forms required to register or renew a franchise (see Resources below).
2. Know that in California, both the franchiser and the franchisee must file a series of documents in order to register a new franchise. These include a certification page, financial statements and offering circular, among others.
3. Request a Uniform Franchise Offering Circular (UFOC) from your potential franchiser. Make sure the UFOC includes the franchiser's history, initial and ongoing franchise fees, your obligations and restrictions as a franchisee, and a list of current franchisees (with accurate contact information).
4. Enlist the help of an experienced franchise law attorney to get a thorough understanding of your rights and responsibilities under a California franchise agreement. Find a franchise law attorney through FindLaw
(see Resources below). 5. Contact as many of the franchisees listed in the UFOC as possible. Ask about their experiences with the
franchiser and about their satisfaction with the franchise as an investment. 6. Find more information on franchising, including helpful publications that help franchisees avoid scams, at the Federal Trade Commission(FTC) website (see Resources below).
Tips & Warnings
- Although you are not legally required to retain the services of a lawyer or accountant in order to purchase a franchise, hiring an experienced professional will help ensure that you accurately complete and file all necessary forms in a timely manner. A franchise attorney can also spot any omissions in the Uniform Franchise Offering Circular (UFOC) from your potential franchiser.
- Know that a franchisee must receive a UFOC at least 10 days before signing a franchise agreement and that he or she must receive a franchise agreement at least five days before signing it or paying any money.
- Potential franchisees who do not understand California's state specific franchise laws may be left with no recourse should they overlook important information in the pre-sale disclosure.
- An incomplete pre-sale disclosure is grounds for civil action in the state of California.